With Spotlight on Super PAC Dollars, Nonprofits Escape Scrutiny

Super PAC filings for 2011 reveal few surprises in identifying contributors: Unions give to Democrats, while businesses back Republicans. Much less is known about the social-welfare nonprofits that might play a big role in the election.

The website for the American Bridge 21st Century Foundation is simply a satire ad against leading Republican candidate Mitt Romney.

When super PACs announced their 2011 fundraising
numbers earlier this week, it provided an early glimpse into how the new way of
financing political campaigns may work in the upcoming election.

The filings showed that super PACs are
indeed fundraising juggernauts, pulling in more than $98 million, with an
average donation of $47,718. But so far, their sources of funding are largely
transparent, not clouded in the kind of secrecy that some campaign-finance
watchers had feared, and not relying that much on connected nonprofits that
don’t disclose donors.

Instead, it was separate announcements this
week from a cluster of politically active social welfare groups, known as 501(c)4s for their IRS tax code, that hinted at how secret money
could factor into the upcoming election -- and in a more direct fashion than
initially forecast after the Supreme Court opened the door to super PACs two
years ago.

Unlike super PACs, which are required to
identify their donors, social-welfare nonprofits such as Crossroads GPS and
Priorities USA -- also referred to as “dark money” groups -- don’t have to disclose
contributions to the FEC, although they are supposed to report spending on
political ads within a day or two. The nonprofits have to disclose their annual
revenue and expenses to the IRS, but often delay such filings. A few have not
yet filed their taxes for 2010.

Campaign
finance watchdogs had worried that 501(c)4s, or “c4s” as
insiders call them, would filter money from unidentified donors through super
PACs, but, if the recent filings are any guide, they may spend funds directly. This
means c4s could have a more muscular, proactive role than previously
anticipated.

“Certainly the Crossroads announcement of
their fundraising totals suggest the c4s will be big players, and could be even
bigger players than the super PACs themselves,” said Paul Ryan, a lawyer for
the Campaign Legal Center.

Though social-welfare nonprofits have been
around for years, they emerged as bigger players in the 2010 midterm elections.

The Supreme Court’s ruling in Citizens United v. FECin January 2010 led to the creation of super
PACS, the turbo-charged political action committees that can raise unlimited
amounts of money from donors, including corporations, unions and nonprofits, as
long as they don’t coordinate with a candidate when they spend that money.

The ruling also jump-started a new crop of
nonprofits. Fifty-nine social-welfare groups reported spending more than $78.6
million on political ads during the 2010 election cycle, according to numbers
provided to ProPublica by the Center for Responsive Politics. That money was
spent mainly by Republican-leaning groups, including more than $26 million
spent by the GOP-leaning American
Action Network and more than $17 million by Crossroads GPS. For a time, those
groups shared the same offices. It’s unknown where any of their money came
from.

After the 2010 election, Democrats started
forming their own super PACs and connected social-welfare nonprofits, such as
Priorities USA Action, the super PAC, and Priorities USA, the nonprofit. Both
were formed by former aides to President Barack Obama, although he and other
Democrats have expressed ambivalence and even anger over the
role of anonymous money in politics.

Super PAC filings released Tuesday showed few donations
from social-welfare nonprofits, or from shell companies with mystery owners.

Republicans, engaged in a bitter primary,
raised more than 74 percent of the super PAC money that could be attributed to
partisan groups, according to data compiled by the Center
for Responsive Politics. (Our “PAC
Track”
application keeps track of spending and donations to
prominent super PACs, and has different numbers.) Of those groups, Restore Our Future, the
super PAC supporting GOP frontrunner Mitt Romney, raised more than $30 million.
American Crossroads, the super PAC led by former Bush White House strategist Karl Rove and other top Republicans, including former party
chairman Ed
Gillespie and Mississippi Gov. Haley
Barbour,
raised $18.4 million.

Fourteen conservative super PACs, nine of
which supported specific Republican presidential candidates, got the bulk of
their more than $67 million in donations from publicity-shy conservative
billionaires and companies. Almost 26 percent of donations to Republican super
PACs came directly from companies, but two super PACS—the one backing
Newt Gingrich, and one backing former candidate Jon Huntsman—only
collected money from individuals. (About 70 percent of the donations to the Huntsman
super PAC came from Huntsman’s father. The major backer of the Gingrich
super PAC is Las Vegas billionaire Sheldon Adelson, who gave $10 million in January. That
money has not yet been reported to the FEC.)

A 15th conservative super PAC, Revolution PAC, which
backs Ron Paul, missed the FEC filing deadline, but so far has spent almost
$126,000 on ads and has given another $10,000 to another pro-Paul super
PAC.

The four best-known Democratic super PACs didn’t
raise nearly as much—perhaps because President Barack Obama is relying on
more traditional sources of funding, or because Democrats don’t have to worry
about a primary. They raised more than $13.7 million, getting the bulk of their
donations from unions, liberal PACs and Hollywood types. Almost 36 percent of
the donations to the liberal super PACs were from unions and union PACs.

Tuesday’s filings included only a handful
of donations that raised questions about transparency.

A social-welfare group called the League of
American Voters, Inc. gave $25,000 to American Crossroads on Dec. 12. The league,
formed in the summer of 2010, is likely related to a better known Republican-leaning
nonprofit, Americans for Tax Reform, run by strategist Grover Norquist; it rents
office space from the group, and gets calls through its phone line.

But it’s not clear what the League of
American Voters actually does. An intern who answered the phone said she was
told the man who ran the group, Bob Adams, a longtime GOP activist, rarely came
to the office. Adams did not respond to an email from a ProPublica reporter.

A Democrat-leaning super PAC, Citizens
for Strength and Security, reported that almost all of its
$72,000
came from a social-welfare nonprofit, also called Citizens for Strength and
Security. Both are run out of post-office boxes at a UPS store on M Street in
Washington.

Some campaign-finance watchdogs had a
problem with super PACs that reported receiving large payments from affiliated
nonprofits for overhead and administrative expenses. A conservative super PAC, Freedomworks for
America,
reported getting almost half its total contributions--$1.34
million—as “in kind” payments from a linked social-welfare nonprofit, Freedomworks. The two leading Democrat super PACs,
Priorities USA Action and American Bridge 21st Century, reported
that they received a total of $438,000 from their affiliated nonprofits, for
rent and other expenses.

Other Republican super PACs reported
getting much less money from their affiliated nonprofits for operating expenses.
Two Republican super PACs, Club for Growth Action and the Congressional
Leadership Fund, reported getting less than $30,000 from their affiliated
nonprofits for shared expenses. American Crossroads reported getting nothing
from Crossroads GPS.

“Bottom line, you still have a problem that
secret money is being channeled into the super PAC to help it function without
the name of the donors ever being known ,” said Fred Wertheimer, who runs
Democracy 21, which advocates campaign-finance reform. “In essence you are
hiding the donors.”

The most prominent c4s seem to be saving
their money for the general election. Crossroads GPS has spent less than
$61,000 on political ads in the last year, paying for one anti-Obama ad in
December and another released Wednesday. Other
conservative social-welfare nonprofits, such as American
Action Network and the National
Organization for Marriage, have reported spending nearly $300,000 on
ads for this election cycle. It’s not clear how much either group raised in
2011, as that amount of money does not have to be made public.

Liberal social-welfare nonprofits also
appear to be waiting to spend their money. Priorities USA has not reported
spending anything; American Bridge 21st Century Foundation has spent
only $5,089 on an ad
opposing Mitt Romney on Jan. 20.

UC Irvine professor Rick Hasen, an
election-law expert who runs a popular blog, said
early reports indicated that people and groups that didn’t mind being publicly
identified gave to super PACs, while those preferring anonymity gave to c4
groups. But it was too early to say what might happen in the coming months, he
added.

“Whatever conclusions people are tempted
to make right now, you have to be tentative, it’s a moving object,” Hasen said.
“Campaign finance is changing so quickly, it’s difficult in the midst of the
election to get a handle on what’s going on.”

There ought be a vibrant branch of the Justice Department beholden to no political party, who cannot be fired or furloughed except for malfeasance or a felony conviction to investigate all pacs including charitable ones.

Clearly, the law needs to be changed. I suggest that ANY exempt organization that spends more than, say, the lesser of 10% of its gross income or $10,000 for political purposes be required to disclose donors who contributed more than the de minimus amount for filing a gift tax return (currently $13,000). If a group wants to influence my vote, I should have the right to know who is paying for it.

Contributions to 501(c)(4) organizations are not exempt from gift tax. (Contributions to 501(c)(3) and 527 organizations are specifically exempt from gift tax.) IRS needs to audit some of these organizations to find out how much gift tax is going unpaid (even though Republicans in Congress don’t want it to).

Rather than rant about corruption (which you can take for granted than I can, and probably have in other comments), I’d like to try attacking this from a different angle. Why does campaign spending swing election results and how can we stymie that process?

That’s not entirely theoretical. While the big music labels spend more and more to promote their latest “sensations,” we’ve been listening to more independent music than ever before. If we can get these bozo politicians to spend as much money as possible while getting people to vote for whoever will benefit the country anyway, that’s the best case scenario, I think.

Still unanswered is how Newt Gingrich recieved a campaign donation of $30K from a NFP charity he founded. This was the subject of an ABC investigation and was presented on a late night news program. The video of a news reporter asking Newt about this after an Iowa fund raising dinner in which Newt stated “No Comment”, walked away, and closed a vehicle door in the reporters face, refusing to answer. As a former treasurer for a NFP, according to IRS rules, an NFP is not allowed to promote or fund political candidates. This is why we need answers. How could we trust anything they say or refuse to answer? I believe there are too many unanswered questions about any of the candidates of either party. Where’s the truth? And, where can we find the truth?

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